Miton Group (MGR): My October Stockslam choice

Thursday, Oct 25 2018 by
11

First of all, a big thanks to Damian, Chris and Ed for putting on the latest Stockslam event in the Aldwych, London (Oct 24). Great attendance, and some very interesting stock picks highlighted.

My contribution to this event was Miton (LON:MGR) , following my Harvey Nash (LON:HVN) choice at the inaugural Stockslam event. 

Description: 

- Size: Small cap (market cap. £111m)

- Activity: Fund manager

- Stockrank: high at 94, focused on high quality and momentum

5bd1e762e067bMGR_stockranks.JPG


Why Miton?

So let's go through the reasoning for this stock pick in short order:

  • Firstly an admission: while I have longed loved the high operational gearing and relatively low capital requirements of fund managers, I have lately been far more cautious on the sector given the secular pressures on margins from the fast growth in popularity of low-cost ETFs and the increasing dominance of the largest investing platforms such as Hargreaves Lansdown (LON:HL.) who can squeeze fund managers' fees. 
    But this makes Miton's performance all the more remarkable, in my view...
  • Miton's focus on small-caps (led by veteran fund manager Gervais Williams) and on multi-asset funds (led by Martin Turner) has been very successful, with 91% of Miton's funds in the top or second quartile of performance over different time periods versus their peers. Gervais Williams in particular is extremely well-known in the small-cap space, with over 25 years of experience. 
  • Growth: The consequent growth in assets under management has been impressive: from £3.35bn in June 2017 to £4.54bn in June 2018, and to £4.81bn as of August. This increase in AUM has been driven mostly by net inflows, not just the increase in market prices. 

    Combined with the high operational leverage typical of fund managers (once fixed costs are covered, variable costs are relatively low so marginal profitability on extra AUM is high), free cash flows have been strong.
  • Momentum: Earnings momentum has been solidly upwards as a result, as evident from the chart below. 

5bd1ea5f3cb8bMGR_EPE_mom.JPG


  • High Quality: Profitability is strong and rising, with a 25% operating margin currently. Return on Capital Employed is not so high, but this is due to a huge net cash cushion of £21m! So an iron-clad balance sheet. 
  • Valuation:…

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Disclaimer:  

My opinions only, not investment recommendations: Please Do Your Own Research

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Miton Group plc, formerly MAM Funds plc, is an investment management company. The Company provides fund management services. Its funds are invested in a range of asset classes under various investment mandates, including multi-asset, equity and portfolios of collective investment schemes. Its product range includes equities, such as CF Miton UK Multi Cap Income Fund and FP Miton Income Fund; multi-assets, such as CF Miton Cautious Multi Asset Fund and PFS Miton Cautious Monthly Income Fund; fund of investment trusts, such as CF Miton Worldwide Opportunities Fund, and closed-end funds, such as The Diverse Income Trust plc and Miton Global Opportunities plc. Its subsidiaries include Miton Group Service Company Limited, which is a holding company and central services provider; PSigma Asset Management Holdings Limited, which is an intermediate holding company; Miton (Hong Kong) Limited, which is a marketing company, and Miton ESOP Trustee Limited, which is a trustee company. more »

LSE Price
51.75p
Change
0.5%
Mkt Cap (£m)
88.9
P/E (fwd)
10.8
Yield (fwd)
4.8



  Is LON:MGR fundamentally strong or weak? Find out More »


1 Post on this Thread show/hide all

tripuram 25th Oct '18 1 of 1
1

Edmund, Enjoyed your style of presentation. Good luck.

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